Consumers take back seat to special interest groups

Industry Minister Sinclair Stevens is doing his very best to demonstrate that the change of government in Ottawa has done nothing to advance the cause of Canadian consumers. Policy decisions still favor the special interest groups that have political clout at the expense of the public in general.

Mr. Stevens indicated last week, according to a Canadian Press report, that the Conservative Government, like the Liberal government before it, may resort to delaying tactics at the docks to restrict auto imports from Japan. Such devices as a deliberate slowing of customs inspection and certification procedures would be used, the minister hinted, if Japanese exporters increase their vehicle shipments to Canada while the two countries are discussing a new arrangement to replace the so-called voluntary export quotas that expired at the end of March.

Such a sneaky and underhanded way of protecting the domestic auto industry would discredit Canada’s efforts to resist the raising of non- tariff trade barriers by other countries.

W. Rowley, a partner in the Toronto legal firm of McMillan Binch, told the Canada and International Trade Conference in Ottawa on Saturday that it should be obvious it is not in Canada’s interest to continue to contribute to protectionist trends. Canada’s dependence on exports is greater than that of any other of the Western industrialized countries. The national interest, therefore, lies in fighting protectionism. Fight compromised “As a small country,” Mr. Rowley said, “our ability to fight the trend abroad is compromised by our inability to fight it successfully at home.” Mr. Rowley, one of Canada’s recognized authorities on competition policy, cited Canada’s trade policies respecting automobiles,footwear, textiles and wine as evidence of the Government’s increasing tendency to favor protection over the objectives competition policy is intended to serve.

An increasingly visible aspect of national politics and, therefore, of international trade policies, is that government in Canada is unequal to the tough responsibility of maintaining an open market when constituents have been heard to complain. “The harsh reality is that, as a nation, we have refused to accept the short-term pain associated with learning the lessons of competitive and open markets. “Instead, we have preferred generally to disadvantage the Canadian customers of the industries we choose to protect and to spread the increased costs of continued inefficiency over the population at large.” Mr. Rowley said Canada could not afford such policies in the past and it cannot afford them now; rejection of protectionism is necessary for the country’s salvation. “The simple reality is that Canada no longer has the trading clout necessary to sustain without undue losses the protection it would impose. The last GATT (General Agreement on Tariffs and Trade) round in Tokyo established this. Subsequent events have confirmed it.” When quotas on Japanese car exports to the United States and Canada were introduced early in this decade, the North American auto industry was experiencing very considerable difficulties. But Mr. Rowley said the evidence was clear that the principal cause of the problem was not small car imports from Japan – but arose instead from high wages, inefficiencies and poor planning in the domestic industry.

After several years of protection, the North American auto industry now is in good health, an improvement that contributed to U.S. President Ronald Reagan’s decision to allow the import quotas to lapse – a decision that the Canadian Government so far has refused to follow. But Mr. Rowley believes that concern over the interests of U.S. consumers also influenced the decision of the Reagan Administration. He quoted a New York Times editorial that claimed the Administration had become convinced the cost of auto protectionism had been too high.

A study by the U.S. International Trade Commission, an independent agency, had found that the quotas had saved 44,000 jobs – but at a cost in higher car prices of about $90,000 a year for each job saved. A similar study by the Federal Trade Commission had put the cost figure at $240,000 a job.

Mr. Rowley said that, for Canada, the high costs of auto protection are magnified by the cheap Canadian dollar. “In these circumstances and against the background of the Government’s preliminary decision to maintain quotas for the time being, there is clearly a role for competition policy advocacy.” Mr. Rowley is struck by the different role of competition policy in Canada and the United States. In the United States, where competition and anti-trust issues have been passionately debated for nearly a century, competition policy was central to the debate when the auto import restraints were introduced and again when the quotas were permitted to lapse. In Canada, by contrast, competition policy issues were ignored by the Liberal government when the quotas were established, and they continue to be ignored by the Conservative Government now, when, in the United States, the import quotas have been discredited by their inordinately high costs to consumers. Public disorganized It seems evident that in Canada, government – of whatever political stripe – feels itself to be under no compulsion to give high priority to consumer interests. Consumers are a disorganized group whose interests remain unfocused and diffuse.

The special interest groups, such as the auto industry and its labor union, by contrast, are well organized and they know very well what they want – protection from competition. They are capable of putting intense, concentrated pressure on government to influence policy decisions in their favor. The tactic works very well when the special interest groups are dealing with opportunistic governments that are less concerned with principles than with re-election.

Mr. Rowley believes it would be helpful if the director of investigation and research under the Combines Investigation Act were to take on an active role as a competition policy advocate. One beneficial result of this might be that Canadians would be helped to regain faith in the market system.

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Enthusiasm for free trade declining in U.S

The United States is willing to negotiate with Canada on freer trade – as long as it is on U.S. terms, a senior U.S. trade expert suggested yesterday.

Geza Feketekuty, senior assistant to the U.S. Special Trade Representative, told a Toronto conference that the United States is willing to consider any bilateral trading proposals Canada suggests, “as long as they are commercially balanced” or of similar benefit to both countries.

Of four options for bilateral trade outlined in a recent Canadian Government discussion paper, Mr. Feketekuty suggested that only one – a comprehensive trade arrangement with Canada – meets U.S. criteria. He added that it will be “the easiest one to sell to the American business community.” However, he opened his speech to a conference sponsored by the Canadian Institute of International Affairs by stressing the U.S. Government’s flexibility. “It is U. S. policy to leave initiatives to its trading partners. “Why? Because we recognize that if we expect a country to come dance with elephants, it will help if the dancing partner can come up with the timing and the tempo of the dance,” he told an audience of business, Government and academic officials.

Despite his emphasis on U.S. flexibility, Mr. Feketekuty was the second senior U.S. trade expert at the weekend conference to warn of a tough new negotiating mood in Washington, where Congress is leaning increasingly toward protectionism.

Achieving a trade agreement with the United States is a top priority for Prime Minister Brian Mulroney’s Conservative Government.

Ottawa has produced a discussion paper outlining four options for bilateral trade, and Mr. Mulroney says he will submit a final proposal to Washington later this year.

The two countries are each other’s largest trading partners in dollar terms; Canada exports 76 per cent of manufactured goods south of the border and the United States sends 72 per cent of its exported manufactured goods to Canada.

But the 4 per cent difference has given the United States a record $123-billion trade deficit, leading to increased calls for protectionist measures from U.S. industry and, Mr. Feketekuty said, heightened concern in Congress. “There’s a sense of ‘we’re hemorrhaging,’ ” he said. Congress is particularly worried about a “flood of imports in the most sensitive areas” for U.S. manufacturers: textiles, steel, footwear and machine tools.

He stressed that, in view of the large U.S. trade deficit, any Canadian proposal must be commercially balanced, ”iving opportunity to the economic interests of both countries.” Sticking to his message of co-operation, however, Mr. Feketekuty said that Canada’s first option – keeping the status quo – “is perfectly acceptable to the United States. You shouldn’t feel we’re trying to pressure you.” But he immediately warned that if Canada chooses this route, it faces possible consequences: The United States might start devoting more energy to trade with Australia and New Zealand.

Canada should also not expect preferential treatment just because it has close economic ties with the United States, Mr. Feketekuty said. If it does want special treatment, then the two countries will have to sit down and hammer out some rules.

Another option proposed by Canada – a trade agreement covering certain manufacturing sectors, otherwise known as a “sectoral free- trade arrangement” – is a possibility, but “there are some real limits as to how far it can be pushed,” Mr. Feketekuty said.

First, the American business community “is not very enthusiastic about it” and second, the United States would have to justify its creation of a special agreement with Canada under the General Agreement on Tariffs and Trade. The tariff agreement obliges the United States to give non- discriminatory treatment to all its trading partners.

A more comprehensive trade arrangement, the Canadian option that comes closest to free trade, and which is favored by the Canadian Chamber of Commerce, would be “the easiest one to sell to the American business community . . . because there is a long-term, broader vision to it,” Mr. Feketekuty said.

In future, he said the United States will be putting more emphasis on bilateral trade negotiations with other countries as well as Canada, because it may be too difficult to try to make progress in multilateral trade talks that require a consensus from 90 countries.

Mr. Feketekuty was challenged by a member of the audience for saying the United States is willing to be flexible in order to maintain good relations between the two countries. “I don’t believe in good will – I believe in greed,” said 25-year-old Serge Jacobs, prompting chuckles from the audience.” Mr. Jacobs, a financial analyst with Pope and Co., said he is “very scared” about “dancing with the elephant” and asked what sort of trade- offs – minerals, fresh water, support of U.S. foreign policy – the United States might seek from Canada in return for its flexibility in trade discussions. “No matter which option you choose, you have to dance with us,” Mr. Feketekuty replied. “We can’t avoid the dance, so we’re saying to you, how do you want to do it? Because we know we’re bigger, so we want to leave the choice to you.” He said President Ronald Reagan’s Administration has no hidden agenda.

“We’re not trying to get anything from you. We’re not trying to get your natural resources . . . we’re not trying to get your water. We really don’t have any specific thing we want from you, other than to say to our businesses that trade (with Canada) is based on free-market principles.”

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Genteel havens soften hard life on The Rock

In Newfoundland you sometimes get more than you ask for. When I went into the Sora craft shop in Corner Brook to buy a pair of sandals, I got not only the footwear, but directions to find what the friendly salesclerk said was Newfoundland’s best swimming hole.

As directed, my wife and I drove west on Highway 450, a spectacular road that dips and soars along the precipitous southern shore of the Humber Arm. This inlet opens into the Bay of Islands, first mapped in 1776 by Captain James Cook. Wrinkles in the rockbound coast shelter snug fishing villages where Union Jacks still snap at front-yard flagpoles and tall wooden houses painted primary colors stare out to sea.

We saw the promised sign locating a nature trail along Blow Me Down Creek just after we passed Frenchman’s Cove (which in typical Newfie incongruity was settled by the Irish). We parked the car and hiked 20 minutes on a spongy trail across a boreal bog laced with tea-colored streams. A boardwalk spanned the soggy areas. Looming over this stark landscape was the ridge of Blow Me Down Mountain, a peak that would impress even in the Rockies. A dozen kids were already bellyflopping and jackknifing in the swimming hole when we reached the idyllic spot. Here, Blow Me Down Creek tumbles over a six-metre-high ledge into a small pool, where some of the boys were snorkelling, then flows through a narrow gorge into another pool five metres deep, where local daredevils perform their high dives.

We ducked out of sight and changed into our bathing suits, a source of much amusement to the kids, who made do with cut-off blue jeans. We plunged into the water; cool but comfortable, and pure bliss in a province where the only time you go swimming in the ocean is when your boat sinks.

Our refreshing dip was interrupted by a commotion at the upper pool. One of the kids paddling around with a face mask and flippers stood up in the shallow water. Like a small Neptune he triumphantly held aloft his prize – a wriggling trout impaled on his trident (actually an old broom handle with a nail in its tip).

We found many unexpected pleasures exploring this piece of “The Rock.” If you want to visit Newfoundland on your next trip to Atlantic Canada, but your time is limited, try the west coast. (Take the CN ferry from North Sydney, N.S., to Channel-Port-aux-Basques.) The east coast around St. John’s has more charming villages, but the Corner Brook region has the island’s most spectacular scenery and some of its best accommodation, no small consideration in a province where a lack of good, affordable rooms remains a major problem.

In addition, the year-round ferry to Port-aux- Basques leaves at least three times a day in July and August and the crossing takes only 6 1/2 hours. The ferry to Argentia, near St. John’s, leaves only three times a week from mid-June to mid-September, and the 18-hour trip is usually booked by the end of April.

Once you get off the ferry at Port-aux-Basques, there’s not much of a decision to make about which way to go. Forty kilometres east the road ends and the trackless southern coast begins. So we headed northeast on the Trans- Canada Highway through the Long Range Mountains, composed of some of the oldest rock on earth.

We stopped in Corner Brook at the Glynmill Inn, a genteel, Tudor-style hostelry built in the 1920s. We were warmly welcome in the elegant dining room, even though we arrived somewhat late for lunch, had no reservations and looked as though we had spent the previous night in a tent, which we had. The fresh salmon was the highlight of the buffet table.

That afternoon we headed out to the swimming hole, then continued on Highway 450 to Blow Me Down Provincial Park at the western end of the Humber Arm. The park has a spectacular setting, tucked between a 250-metre half-dome of rock and a forested promontory called Flapper Hill. And the price was right: $5 a night for a campsite and all the firewood we could burn. In fact, the province’s excellent park system is the best accommodation bargain on the island.

In the following four days we walked along the park’s pebbly beach, dipped our toes in the frigid water and hiked to a lookout atop Flapper Hill to watch the morning sun brighten forested islands, strewn like stepping stones across the bay.

We also used the park as a base to explore the region. We followed twisting backroads past meadows where wind-blown ponies stood hock- high in grass. We went through sleepy outports where lanes wound behind and between houses, sometimes ending in a backyard or at a rickety wharf lined with weathered fishing shacks.

The scenic highlights of the west coast are in Gros Morne National Park, which embraces 160 kilometres of rugged shoreline, a half-dozen steep-walled fjords and some of the highest peaks in eastern North America.

The star attraction of the park is Western Brook Pond, a freshwater fjord located in a 16- kilometre-long twisted canyon, boxed in by perpendicular cliffs up to 600 metres high. We hiked four kilometres in from the highway to the dock, where a tour boat leaves for excursions to the end of the pond.

There’s something about sailing into this strange, narrowing gorge that stirs apocalyptic thoughts, as though you were heading into the heart of darkness. At the end of the canyon we found a lonely looking fellow sitting on a dock, fishing pole in hand. The tour operator had delivered him there that morning and would take him out that night on his last run. He’d have to. Otherwise, if the fellow wanted to get back to civilization, he would have to swim the length of Western Brook Pond, or scale the cliffs and hike south for three days to reach the nearest park station. We were comfortable and safe on our excursion boat, but the fisherman reminded us that we had indeed just sailed into an immense wilderness. IF YOU GO Passenger fare on the CN Marine ferry between North Sydney and Port-aux- Basques is $10.50 one way. The car charge is $33. A deluxe cabin for four people costs $60. The Argentia ferry costs $28 per passenger, $75 a car, and $70 for a deluxe cabin (two single beds, shower and private toilet). A two-berth cabin (without private toilet) costs $35. For reservations, call CN Marine toll-free at 1-800-565-9411.

Double rooms at the Glynmill Inn in Corner Brook start at $58. For more information, write The Glynmill Inn, Cobb Lane, P.O. Box 550, Corner Brook, A2H 6E6, telephone (709) 634-5181.

The Skane House, which has facilities for the handicapped, charges $50 for a double room with breakfast. For more information, write the Skane House, P.O. Box 685, Corner Brook, A2H 6G1, telephone (709) 789-3673.

For general information about the province, write the Department of Development, Tourism Branch, P.O. Box 2016, St. John’s, Newfoundland A1C 5R8.

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Aid for displaced workers urged

Layoffs have often been the “knee-jerk” reaction to businesses’ needs to cut costs, but “this reaction should not be accepted as the norm,” says federal Labor Minister William McKnight.

The federal Government is concerned about the need for new employer attitudes toward job security for employees, Mr. McKnight told members of the Personnel Association of Toronto.

Individual companies should give a high priority to the welfare of employees when considering the introduction of technological changes, he said. “The provision of retraining programs and counselling services, the development of realistic relocation policies, as well as the provision of fair and equitable severance pay are some of the considerations that should be viewed as basic.” However, Mr. McKnight said in an interview that he was not proposing new legislation: “You cannot legislate good industrial relations.” Instead, he proposed that business, labor and governments work together to develop programs to improve productivity and, at the same time, assist workers who are unavoidably displaced. “It is imperative that these individuals should not be expected to bear all the adverse effects of productivity advances. Rather, the benefits of such advances should be put to use to assist those workers who suffer in the process.” The federal Government is reviewing its labor adjustment benefits program, which assists displaced older workers in the clothing, textile, footwear and tanning industries and in certain isolated mining communities. “If the narrow scope of the labor adjustment benefits program is to be expanded, employers and/or provincial governments must begin to accept some of the costs for these actions.” In the collective bargaining field, labor and management must always be free to work out their own agreements, he said. “And they must be free – within certain constraints – to exercise their rights to strike or to lock out. “Frequent legislative intervention to end a work stoppage creates disrespect for the collective bargaining process itself, and means that labor and management avoid the responsibility for making their own decisions.” Mr. McKnight promised to keep the use of back-to-work legislation to “a bare minimum.” Despite the adversarial nature of industrial relations, Mr. McKnight said his Government hopes to build a strong and productive relationship between government, business and labor.

Frances Bairstow, director of the industrial relations centre at McGill University, had earlier told members of the personnel association that “the overriding concern of the average union member is to keep his or her job.” Union members do not want to hear “sterile rhetoric about fat- cat capitalists” from their leaders, she said. “They are interested in concrete efforts aimed at dealing with specific problems. . . . “A union cannot create jobs and a single company can do little more than add a limited number of jobs, depending on its competitive situation,” she said. “But a combination of employers and unions in an industry can work wonders.”

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A toast to the EEC

Wine drinkers of Canada, take heart. The chains of bureaucracy and protectionism may be broken. The liquor monopolies which rob our pocketbooks may yet be brought to heel.

The precise day of liberation cannot be predicted because the forces of bureaucracy and protectionism are deeply entrenched. But theirs is a losing struggle.

As every Canadian wine drinker knows, we pay dearly for imported wine, except when the Canadian dollar experiences temporary strength against European currencies.

Even then, we do not receive the appropriate benefits from our strong currency because omnipotent and arrogant provincial liquor boards, egged on by politicians and domestic wine producers, tax imported wine twice as heavily as the heavenly product from Niagara and the Okanagan.

This taxing practice places Canada utterly at variance with our international trading obligations. For example, Article 111 of the General Agreement on Tariffs and Trade (GATT) states that any import ”hall be accorded treatment no less favourable than that accorded to like products of national origin.” For years, the European Economic Community has decried this unfair situation, the argument being slightly dulled by the community’s extensive subsidies to the wine industry. The Americans, too, wish more California wine in Canadian stores at cheaper prices.

Provinces have responded to these complaints with trifling gestures – better display for foreign wines, removal of ”andling charges.”But the tax discrimination remains. Provincial cabinets have known not only where the votes are, but also where easy revenues can be found: namely in discriminatory taxation. They have also understood the neat foil of federalism; only Ottawa negotiates international trade agreements and only Ottawa is helpless to end provincial tax discrimination. This state of mutual helplessness and convenience allows both levels of government to point fingers at each other without intending to take any action.

Now the EEC is stepping up the pressure, asking for a GATT ruling against the liquor boards. This unwieldly procedure will take several years but in the meantime it puts the liquor boards and the provincial govvernments clearly on the legal defensive. Provinces will also be hard- pressed to resist American demands for equal treatment if Canada-U.S. trade negotiations get serious.

If provinces ignore a GATT ruling, Canadians will be paying twice to protect domestic wineries – in higher taxes on wine imports and higher duties on exports.

This kind of economic nonesense might soon prevail in the shoe industry. Since 1977, Canada had imposed quotas on footwear imports. Politicians explained at the time that the quotas would be temporary. Instead, the quotas have been extended year after year, raising the price of shoes, slowing down readjustments and infuriating our trading partners.

Once again, the EEC is losing patience. Pushed by the Italians, the major footwear exporters, the EEC is warning that a quota extension will be met by eye-popping countervailing duties. Maybe this is bluff. Maybe not. But Canada will certainly face higher duties next year if the quotas remain.

The cases of shoes and wine nicely illustrate the seduction and penalties of protectionism. One sector gains through discrimination; all others lose. One group, passionately motivated, is politically satisfied; all others, largely indifferent, lose. The entire economy suffers but politicians gain. Sometimes only the sanction of international penalty can free us from political short-sightedness.

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